Because of what the government has called "serious systemic failure" in its monitoring of its international student body. It says UK Border Agency checks suggest that in more than a quarter of the cases it sampled, the students did not have permission to stay in the country, a "significant proportion" did not have sufficient English and there was no proof that half of those sampled were turning up to lectures.

How many students are affected?

The university says around 2,700 already there or planning to go to London Met are directly affected, but the crisis could affect the entire future of the university with its 30,000 students and 2,000 staff.

Will students have to leave the country?

Those already on courses and with valid visas have 60 days to find another course at another university or college. If they fail to do so they must leave voluntarily or be "administratively removed". The 60-day clock for each student starts ticking when he or she receives a letter from the UK Border Agency. These are already being sent out.

Any existing student without valid permission to remain in this country – and the UK Border Agency says its checks found some – do not get the same 60-day leeway.

However, students who were about to come to the UK to take up their studies with what were until Wednesday valid visas will now have them cancelled. If they then travel to the UK, they will be refused entry. It is uncertain how many of these potential students there are. The university said it had confirmed places for about 300 before its licence was suspended on 16 July but it is not clear how many of these have been given visas.

How easy will it be to find new places elsewhere for international students already at London Met?

Not at all. Most universities have fixed their numbers of international students by now. Then there is the question of matching course requirements to the academic work any London Met international student has already done. Then the student has to apply again for a valid visa. If they don't have one within 60 days from Wednesday they have to leave.

Why is the future of the university potentially at risk?

The university says this decision blows a £30m hole in its budget – taking away nearly a fifth of it. The university calls the UKBA action a "disproportionate" response which could have "severely damaging" implications for its other students. It could not make up the shortfall through taking in more home students even if enough wanted to go there. Funding from the government depends on limits it sets for the number of home students each university can take.

Severe financial problems at the university have already meant huge changes at London Met since 2009, including a 70% cut on the number of courses it offers.

What does this mean for Britain's reputation abroad?

There is some anxiety across the higher education sector. There are about 300,000 non-EU students at university in Britain at any one time, worth an estimated £5bn a year to the economy. Quite apart from that, the international flavour of campuses, not just in seminar rooms and lecture halls, is regarded as a vital part of the university experience.

The UKBA says it has been working with London Met since March to remedy its shortcomings. Three other universities have previously had their licence to recruit students suspended and soon put matters right. It also says 500 higher education colleges have had their licences revoked. It is unable to easily estimate the number of student visas that have been revoked as a result or replacement ones issued where students have found suitably licensed alternatives.

"These are problems with one university, not the whole sector," said a spokesperson. "British universities are among the best in the world – and Britain remains a top-class destination for top-class international students.

"We are doing everything possible, working with the taskforce established by the Department for Business, Innovation and Skills, to assist students that have been affected."

The UK Border Agency's general advice to international students is here.